LONDON, May 18 (Reuters) – Europe’s top oil and gas companies have diverted a larger share of their cash to green energy projects since the coronavirus outbreak in a bet the global health crisis will leave a long-term dent in fossil fuel demand, according to a Reuters review of company statements and interviews with executives.

The plans of companies like BP, Royal Dutch Shell and Total are in step with the European Union’s efforts to transition to a lower-carbon economy and away from a century-old reliance on oil, and reflect the region’s widening rift with the United States where both the government and the top drillers are largely staying committed to oil and gas.

“We are all living differently and there is a real possibility that some of this will stick,” BP Chief Executive Bernard Looney told Reuters in a recent interview, citing big declines in air and road travel, and a boost in telecommuting.

Global oil majors have all cut capital spending sharply as worldwide stay-at-home orders triggered by the coronavirus outbreak slammed fuel demand and sent oil prices to record lows.

But Europe’s top five producers – BP, Shell, Total, Eni , and Equinor – are all focusing their investment cuts mainly on oil and gas activities, and giving their renewables and low carbon businesses a relative boost, according to Reuters calculations.

Company executives and investors say they expect fossil fuel demand to peak earlier than previously thought. At the same time, the EU is expected to focus economic stimulus on green energy infrastructure in the wake of the crisis to further align it with the ambitions of the Paris agreement to fight climate change, making investments in the sector more attractive.

European Commission President Ursula von der Leyen recently pledged to make climate policies the bloc’s “motor for the recovery.”

BP aims to keep its previously planned $500 million in spending on low-carbon initiatives this year intact, despite a company-wide spending cut of 20% in the wake of the coronavirus, its incoming Chief Financial Officer Murray Auchincloss said in an analyst call on April 28.

Shell CEO Ben van Beurden, meanwhile, told reporters in an April 30 conference call he also wants to “spare” the company’s New Energy division, which is focused on renewables and low-carbon technologies, from the worst of its budget cuts.

“We still believe there is an energy transition under way that may pick up speed in the recovery stage and we want to be well-positioned,” van Beurden said.

Total still plans to spend its previously planned $1.5-$2 billion on its low-carbon business, despite cutting its overall 2020 spending by $3 billion to $15 billion, CEO Patrick Pouyanne said in an interview with French paper Le Figaro on May 6.

Equinor and Eni also both expressed a continued commitment to their plans to transition to clean energy. An Equinor spokesman confirmed the company is not changing its planned $1 billion of investment in renewables and low carbon energy in 2020 and 2021, despite cuts elsewhere.

Equinor, Shell and Total also announced on May 15 they are investing in a project in Norway to capture and store carbon.

Even after the rejigged spending, investments in renewables and low-carbon technologies for the top five European oil companies represents no more than 15% of total investments, and climate advocates are pressuring the companies to do more.

The group had already outlined plans to sharply reduce carbon emissions by 2050 prior to the coronavirus outbreak.

Some investor said, however, that these plans fall short of the Paris climate goals.

London-based investor Sarasin & Partners said that neither Shell or Total “has set out how they will shift capital away from expanding fossil fuel production to the extent required by their ambitions.”

TRANS-ATLANTIC RIFT

The biggest U.S. oil and gas companies are taking a different path, encouraged by a government that is a vocal supporter of expanding fossil fuel production: investment in business ventures outside petroleum hardly register, and that is not going to change without a shift in government policy.

Chevron CEO Mike Wirth told investors in a conference call on May 1 he expects demand for oil and gas to rebound after the coronavirus pandemic lifts.

“The world is not ready to transition to another source of energy in large part anytime soon,” he said.

Exxon Mobil CEO Darren Woods echoed the view in a call with analysts on the same day.

“I know that there are a lot of different views on what the future holds, but I want to be clear on how we see it: The long-term fundamentals that drive our business have not changed.”

Exxon shareholder activists unhappy with the company’s broad rejection of climate proposals in recent years have been pushing recently to strip Woods of his dual chairman role.

The American Petroleum Institute, which represents all the largest U.S. oil and gas drillers as well as Shell, BP and Total, said it also views the coronavirus outbreak’s impact on fossil fuel demand as a blip.

U.S. President Donald Trump’s administration has long cast doubt on the science of climate change and has decided to pull out of the Paris climate agreement citing the economic cost. The administration is also contemplating ways to pump billions into its oil and gas sector through tax breaks to preserve an industry that rapidly grew over the past decade.

The yawning transatlantic divide offers investors a troubling choice, according to analysts.

On the one hand, aligning with international commitments to the Paris deal seems like a “safe choice”, according to Bruce Duguid, head of stewardship Hermes Equity Ownership Services.

On the other hand, the deeply depressed prices for fossil fuels since the onset of the coronavirus could make it the easy choice for consumers as economies recover.

“At the moment it is not clear who is right,” said Tal Lomnitzer, senior investment manager at Janus Henderson. “It is possible that Exxon and Chevron will emerge from the other side of the crisis looking like heroes. Or possibly irresponsible.”

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Bonus Group: More news of BG diaspora.
At the Annual General Meeting of Hurricane Energy plc held on 3rd of June, Ms Beverley Smith was elected as a Director of the Company with 99.85% of the votes in favour, 0.15% votes against.
Having previous experience as a VP and overseeing a hasty retreat from Algeria at the now defunct BG Group, will doubtless be valuable when exploring rock bottom and/or fractured basement on the Atlantic Margin!

Bogus Group: Would this be the same managers and geologists that made the competent business development and exploration decision to develop the Knarr Field? A venture that failed to meet its potential, both in terms of daily production and field life. In fact, I recall the UK based BG Group General Manager for Europe was a geologist.

Bonus Group: Useless degree????.
'Also it is not possible to be a competent geologist in the oil and gas business without having a very good background education in both sedimentation and stratigraphy. Both topics go hand in hand. Furthermore, managers at both the middle level and senior level need to be well versed in this subject area in order to make competent business development and exploration decisions.'
These would be the same 'job for life', middle to senior level managers and competent geologists who at BG Group, for example, assured work at a cost of £200MM which later cost the company £2Bn because it was wrong (according to the Chief Operating Officer at the time), and also spent more than five years working in an asset following corrupt workflows?
From your post on this Blog, I see that your time at a 'reputable university' was well spent in learning how to be exuberant with punctuation.
That is all I have to say on the topic. Cheers!

Useless degree????: I was reading your blog today and saw a reference to 'sedimentology' being a 'useless degree'. I do not believe any reputable university offers such a degree. Sedimentology is a sub-discipline within the field of geology. Reputable universities do offer degrees in geology. It is possible to specialize in sedimentology I suppose, but you need to be enrolled in a geology program to do so. I know, I am a geologist, among other things.

Also it is not possible to be a competent geologist in the oil and gas business without having a very good background education in both sedimentation and stratigraphy. Both topics go hand in hand.

Furthermore, managers at both the middle level and senior level need to be well versed in this subject area in order to make competent business development and exploration decisions.

That is all I have to say on the topic. Cheers.

Bonus Group: USA USA USA Hardly surprising is it. The company is overrun by sycophantic, grossly over paid, sniggering middle managers with numerous degrees in sedimentology, or some subject as equally useless, with little to no technical ability or technical background, who are dependent upon technical staff who likewise have little, to no, practical experience and who have only ever seen a rig laid up in the Firth of Forth in photographs, or when they went for a jolly with their wives for an outing one day. They spend their time documenting 'Lessons Learned' on fancy spreadsheets which are then filed in some obtuse filing system and they never learn the damn lessons!

USA USA USA: Missed opportunities is not as bad as the botched opportunities. RDS has always claimed that there is limited capital and resources to exploit every opportunity. We all agree. But the fact that so many recent projects have failed to deliver production promises, that is more clearly a lack of management and leadership. Prelude? Penn Chem? Olympus? and the many others that have not delivered on schedule, cost or production. Then there are the projects that move forward with little to no assurance of these vital front end loading to verify that the promise is realistic. It is just more of the same - Bloat / Cut / Reorg and repeat...